Holistic Approach Examines Cost of Reducing Methane Emissions in Canada

Ongoing debate over the economic and environmental effects of methane emissions across the natural gas supply chain in Canada are driving a need to understand actual amounts of methane released. A recent study by the Canadian Energy Research Institute (CERI) used a holistic approach to methane emissions across the entire natural gas supply chain and across all Canadian provinces. CERI developed a modeling tool, the Integrated CH4 Emission Reduction Model (ICERM), for the study to quantify methane emissions and assess reduction opportunities and economic implications at every step of the supply chain. The results of the study are published in the report “Economic and Environmental Impacts of Methane Emissions in the Natural Gas Supply Chain.”

Setting the Stage

In 2016, the governments of Canada, the US, and Mexico proposed new regulations to reduce methane emissions from the oil and gas sector in their respective countries to 40–45% below 2012 levels by 2025. Using ICERM, CERI quantified 2017 methane emissions from the entire Canadian supply chain to be 40.4 Mt of CO2 equivalent (CO2e). Overall targeted reductions are approximately 25 Mt of CO2e.

Methane is the primary constituent of natural gas, with compositions that can vary from below 50% to almost 100%, depending on the source and the handling stage along the supply chain. According to the US Environmental Protection Agency, methane is also a potent greenhouse gas with a current climate-forcing potential over a 100-year period estimated in the range of 28–36 times that of CO2, depending on the estimation method.

Methane releases can occur across all stages of the natural gas supply chain—upstream (in production, gas gathering, and processing units), midstream (in transmission and storage), and downstream (in gas distribution and consumption). Emissions from the sectors can be grouped further into source categories such as the following.

  • Fugitive—Leak or unintentional release of methane emissions
  • Flared—Undestroyed methane upstream from gas flaring related to incomplete combustion
  • Vented—Methane released intentionally to the atmosphere upstream, midstream, or downstream
  • Heating—Undestroyed methane midstream from stationary combustion resulting from incomplete combustion
  • Burner Tip—Undestroyed methane at downstream end-user burners because of incomplete combustion

Upstream natural gas operations in Canada are confined to British Columbia, Alberta, Saskatchewan, Manitoba, and a few areas in eastern Canada. Gas processing is concentrated in Alberta, British Columbia, and Saskatchewan. Studies indicate that upstream emissions account for the larger part of overall oil and gas emissions in the country. Gas transmission is the second major source. Gas distribution downstream is often seen as the smallest contributor.

According to CERI, Alberta contributes more emissions than other provinces with an estimated 2017 total of approximately 24.5 Mt of CO2e. Of this volume, the upstream sector is responsible for as much as 97%. Emissions are primarily from oil and gas wells and gathering facilities. British Columbia, Saskatchewan, and Manitoba had total 2017 estimated values of 2.2 million, 11.7 million, and 0.8 million Mt of CO2e, respectively.

Both the Canadian federal government and the governments of the most active oil and gas provinces have proposed regulations to combat methane emissions. However, the federal government has stated that, unless provincial regulations are equivalent to or more conservative than federal ones, the provinces will have to comply with the proposed federal regulations.

New, Holistic Approach

Several studies have investigated methane emissions from a few sources and sites in Canada. The majority have focused on pneumatic devices. Some of these have been limited in their use of Canada-specific emission and activity factors to quantify the emissions. These studies did not assess reduction opportunities or their economic implications from end to end of the supply chain.

The CERI ICERM model prioritized the use of Canadian data in all cases for its holistic study. Sources of emissions were identified, and mitigation technologies were assessed from wellhead to burner tip.

ICERM includes three modules for emission quantification, abatement cost estimation, and optimizing selection of mitigation technologies to meet emission-reduction targets cost effectively. By combining the emission quantification results and abatement cost data, CERI evaluated the effects of various policy scenarios and the total cost of achieving the reductions for each scenario.

The ICERM optimization module combines emission quantification and abatement cost data to evaluate emission reduction and economic effects of various policy scenarios. The Canadian study evaluated three different hypothetical policy scenarios to achieve emission reductions by adopting various combinations of mitigation technologies. These scenarios were as follows:

  • Maximum Reduction—Evaluated the economic cost and maximum amount of emission reduction that could be achieved using the mitigation technologies assessed in this study
  • Uniform Reduction—Evaluated the economic cost and emission reduction achieved if a 45% reduction target were assigned to each emitting device in the supply chain (except burner-tip emissions)
  • Optimal Reduction—Identified a cost-effective mitigation pathway to reduce emissions to 45% of baseline levels as reported in the National Inventory Report (mimics methane regulations in Canada)

These scenarios were applied to the entire Canadian natural gas supply chain. This contrasts with the existing federal and provincial regulations, which place methane emission reduction targets primarily in the upstream sector.

Optimal emission reduction was calculated from the average of the results obtained using the lower and upper ranges of the abatement costs. This scenario did not specify arbitrarily what emission sources should be controlled but used linear programming to determine cost-effective mitigation to meet expected reduction at both federal and provincial levels. For provinces such as British Columbia, Alberta, and Saskatchewan with existing methane emissions regulations, the optimal scenario specified methane emission reduction targets according to provincial baselines as reported in Canada’s national inventory report. For other provinces, federal methane regulation baseline year (2012) emissions were adopted. Reductions in the maximum and uniform scenarios were predominantly from upstream venting, fugitives, and pneumatic pumps. In the optimal scenario, reductions were mainly from upstream venting and pneumatic devices, including pumps, controllers, and generic instrumentation.

Computing the Costs

Credit: CERI.
Fig. 1—Emission reduction and ranges of total cost
of Canadian natural gas supply chain methane
abatement under three CERI scenarios.

For the three abatement scenarios, the total cost of emissions reduction for each scenario was as follows (Fig. 1):

  • Maximum Reduction—CAD 3.0 billion–5.5 billion for a total methane emission reduction of approximately 33 Mt of CO2e.
  • Uniform Reduction—CAD 1.4 billion–2.6 billion for total reduction of 18 Mt of CO2e
  • Optimal Reduction—CAD 700 million–1.4 billion for total reduction of 22 Mt of CO2e

These costs did not include those for administration, measurement, and reporting, which are required by existing methane regulations in Canada.

Canadian national inventory report data indicate methane emissions of 107.5 Mt of CO2e in the baseline year of 2012, of which approximately 51%, or 55 Mt of CO2e, was from oil and gas. A reduction target of 45% across all sectors of the natural gas supply chain would amount to approximately 25 Mt of CO2e. Applying CERI’s optimal reduction scenario across all provinces, the total cost of emissions reduction would be in the range of CAD 900 million–1.7 billion.

Find the full report here.



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